Divisional Engineer (Administration) vs Arumuga Perumal

V. Ramasubramanian, J.—Both these appeals are filed under Section 54 of the Land Acquisition Act, 1894 (in short "the Act"), challenging the enhancement of compensation, awarded by the Land Acquisition Tribunal (Principal Sub-Court), Tirunelveli, on a Reference under Section 18 of the Act. Heard Mr. B. Pugalendhi, learned Special Government Pleader appearing for the Acquisition Officer, Mr. K. Govindarajan, learned counsel appearing for the requisitioning body, both of whom are the appellants and Mr. S.S. Sundar, learned counsel appearing for the 1st respondent in the appeals.

The land of an extent of Hectares 0.40.5 (Acres 1.00) in S.F. No. 500/2, Kulavanigarpuram, Palayamkottai Taluk, Tirunelveli District, was acquired by the Government of Tamil Nadu, for the purpose of establishment of an Electronic Telephone Exchange. The Notification under Section 4(1) of the Act was issued on 09.08.1994. It was published in the Government Gazette on 24.08.1994 and was published in the locality on 03.10.1994.

After completion of all formalities, an award was passed on 02.12.1996, fixing the compensation at the rate of Rs. 5,500/- per cent. The 1st respondent in these appeals (land owner) sought a reference under Section 18 of the Act and the District Collector made a reference to the Land Acquisition Tribunal (Principal Sub-Court), Tirunelveli. By a judgment dated 06.06.2005, passed in LAOP No. 111/2000, the Tribunal enhanced the compensation to Rs. 28000/- per cent. The Tribunal also directed payment of 30% solatium and awarded interest at 12% per annum from the date of Notification under Section 4(1) of the Act till the date of possession, interest at the rate of 9% for a period of one year thereafter and interest at the rate of 15% per annum from the date of expiry of one year till the date of making the deposit. Aggrieved by such enhancement, the requisitioning body has come up with A.S. (MD) No. 365 of 2005. The Land Acquisition Officer himself has come up with the next Appeal A.S. (MD) No. 250 of 2008.

For arriving at the market value, the Revenue Divisional Officer (Land Acquisition Officer) gathered the sales statistics for a period of one year from 03.10.1993 to 02.10.1994, since the publication of the Notification under Section 4(1) of the Act was made in the locality on 03.10.1994. There were 54 sales during the said period. The Land Acquisition Officer discarded 53 sales, for various reasons such as the lands being far away or the sales being for various items of properties or the extent being very small. Therefore, only one item of sale was left. This data land of an extent of 12.86 cents in Survey No. 531/2 and 522/2B had been sold for Rs. 25000/- under Sale Deed dated 19.01.1994. But, the sale deed was referred for adjudication on the ground of under-valuation and the market value was fixed at Rs. 5,50,000/- per acre by the Special Deputy Collector, under Section 47(A) of the Indian Stamp Act. Therefore, the Land Acquisition Officer adopted the rate of 5,500/- per cent. Before the Land Acquisition Tribunal, the 1st respondent (land owner) examined himself as C.W.I and filed eight documents as Exs. C-1 to C-8. On the side of the Acquiring Authority, one Mr. Ramakrishnan, working as Special Divisional Officer in the Land and Building Section of the requisitioning body, was examined as R.W.1, the Secretary of the Local Planning Authority was examined as R.W.2, the Revenue Divisional Officer, Tirunelveli, was examined as R.W.3 and an Assistant, working in the Melapalayam Zonal Office of Tirunelveli City Municipal Corporation, was examined as R.W.4. 15 documents were filed as Exs.R-1 to R-15 before the Tribunal.

Ex. C5 was the guideline valuation, available in the office of the Sub-Registrar of the area concerned. Ex. C-6 was a sale deed, dated 05.09.1994. Ex. C-8 was a sale deed, dated 22.06.1990. The Land Acquisition Tribunal did not take into account Ex. C-6, in view of the fact that the sale deed was executed after the date of Section 4(1) Notification. As per this document Ex. C-6, the market value of the land, per cent, was Rs. 32,000/-. The extent of land covered by this sale deed was also only 5 cents. Therefore, the Tribunal did not go by this document.

However, the Tribunal took into account Ex. C-8 Sale Deed, dated 22.06.1990. Under this document, land of an extent of 7 cents were sold. Sale consideration was Rs. 48/- per sq.ft., which worked out to Rs. 21000/- per cent. Therefore, after allowing increase of 10% per year from 1990 till the year 1994, the Tribunal arrived at the compensation of Rs. 28000/- per cent.

The fixation of compensation by the Tribunal is challenged both by the Acquiring Authority and the Requisitioning Body, primarily on three grounds, namely,

"(a) that the escalation given at 10% every year was without any basis;

(b) that the extent of land sold under Ex. C-8 was very small and hence cannot form the basis for fixation of the rate; and

(c)that development charges to the extent of 40% ought to have been deducted from the compensation."

Additionally, Mr. K. Govindarajan, learned counsel appearing for BSNL (requisitioning body), also contended that though the land acquired was Acre 1.00, a portion of the land has been taken away by the Local Planning Authority for laying roads and that therefore the actual extent of land now in the occupation of BSNL is far less. But, at the outset, we cannot allow the appellant (Requisitioning Body) to raise this contention here. We are now concerned only with the appeals arising out of enhancement of compensation ordered by the Tribunal. We are not concerned about the other disputes. Moreover, the land owner has been deprived of the entire extent of Acre 1.00 and he is not claiming re-delivery of the property, on the ground that the entire extent has not been put to use for the purpose for which it was acquired. Therefore, this argument of the learned counsel for BSNL is rejected.

Now, let us take up the three primary grounds on which the appellants challenge the award of the Tribunal.

Ground No. 1. As we have stated earlier, the first ground of challenge is that the Tribunal ought not to have given an escalation of price at the rate of 10% per year.

It is seen from Paragraph 12 of the judgment of the Tribunal that as per Ex. C-8 sale deed, the market value of the land per sq.ft. was Rs. 48/-, in an approved lay-out in Perumalpuram Extension Area. Since a portion of the acquired land has been used by the Local Planning Authority for the purpose of laying roads in that extension area itself, the Tribunal adopted the rate of Rs. 48/- per sq.ft. After doing so, the Tribunal applied an escalation of 10% every year from the year 1990 to the year 1994. (The Base Rate was adopted as Rs. 20,000/- and 10% of the same was taken to be Rs. 2,000/-. For four years, the escalation worked-out to Rs. 8,000/-, which, together with the base rate, came to Rs. 28,000/-)

Though the learned counsel for the appellants opposed the escalation at the rate of 10% per year, Mr. S.S. Sundar, learned counsel for the 1st respondent relied upon atleast two decisions of the Supreme Court, where the Court granted an escalation of 12%. In Jasarvinder Singh and Others Vs. President, Land Acquisition Tribunal and Others, , the Supreme court awarded an increase at the rate of 12% per annum. Similarly, in Ashrafi and Others Vs. State of Haryana and Others, , the Supreme Court allowed an enhancement of 12%, to be calculated on cumulative basis.

In the case on hand, 10% of escalation has not been ordered on cumulative basis but, ordered only on flat basis. Therefore, we do not find anything wrong in the Tribunal granting escalation at the rate of 10% per year and that too on flat rate basis. Hence, the first ground of attack to the award of the Tribunal fails.

Ground No. 2: The second ground of attack is that the base rate adopted by the Tribunal was in respect of a land of very small extent and that therefore, the fixation of compensation based upon Ex. C-8 was wrong.

But, we do not think so. The Land Acquisition Officer himself took 54 sale transactions into consideration and rejected 53 of them for various reasons. He himself adopted only one sale transaction, which related to the sale of a land of an extent of 12.86 cents under a sale deed, dated 19.01.1994. But, the document was referred for under-valuation, after which the market value was fixed at Rs. 5,50,000/- per acre. Therefore, it is clear that there was no land of a larger extent, on which any transaction had taken place during the period of one year, immediately before the date of Notification under Section 4(1) of the Act.

In other words, the Land Acquisition Officer took into account the sale of a land of an extent of 12.86 cents. The Tribunal took into account the sale of a land of an extent of 7 cents.

Therefore, it is clear that both the Land Acquisition Officer as well as the Tribunal did not have for their guidance any sale transaction involving a land of a larger extent. In such circumstances, the normal rule that the value indicated in a sale transaction of a smaller extent of land cannot form basis for fixing compensation cannot be applied.

Therefore, we are unable to apply the ratio laid down by the Supreme Court in K. Vasundara Devi Vs. Revenue Divisional Officer (LAO), . As a matter of fact, the Tribunal found, on evidence, that even the guideline valuation as per Ex. C-5 was Rs. 58.50 per sq.ft. This rate was more than the rate of Rs. 48/- per sq.ft., adopted by the Tribunal, as per Ex. C-8. After adopting the rate as found in Ex. C-8, the Tribunal actually brought it down a little.

To be precise, the value per cent would come to Rs. 20,928/-, if the rate of Rs. 48/-per sq.ft. is adopted. The Tribunal could have therefore taken Rs. 21000/- per cent. However, the Tribunal took only Rs. 20,000/- per cent and applied 10% increase. The Tribunal could have also applied 12% escalation as per the decisions of the Supreme Court. But, it adopted only 10% per year as escalation, that too on flat basis. Therefore, the second ground of attack of the appellants also fails.

Ground No. 3: The last ground of challenge is about the failure of the Tribunal to deduct 40% towards development charges.

The concept of deducting development charges, from the total price, was developed by Courts due to various factors, one of which is the size of the land whose sale forms the basis for finding out the market value. As repeatedly held by Courts, market value of a property is ordinarily understood to be the price that the property may fetch in the open market, if sold by a willing seller unaffected by the special needs of the purchaser.

Therefore, in Viluben Jhalejar Contractor (D) by LRs. Vs. State of Gujarat, , the Supreme Court indicated that since the amount of compensation cannot be ascertained with mathematical accuracy, a comparable instance has to be identified having regard to the proximity from the time angle as well as the proximity from situation angle. After holding that suitable adjustment had to be made with regard to various positive and negative factors, the Supreme Court tabulated those factors in paragraph 20 of it decision in Viluben, as follows:

After presenting positive and negative factors in a tabular column, the Supreme Court pointed out in Viluben that while a smaller plot may be within the reach of many, a large block of land will have to be developed after incurring sufficient expenditure. Therefore, the Court held that development charges, ranging between 20% and 50%, may have to be deducted.

In Kasturi and Others Vs. State of Haryana, , the Supreme Court held that in respect of agricultural land or undeveloped land, which has potential value for housing or commercial purposes, normally 1/3rd amount of compensation had to be deducted. But, at the same time, the Court pointed out that in cases where there are certain advantages by virtue of developed area around, it may help in reducing the percentage of cut to be applied, as the developmental charges required may be less in such cases.

The general rule of deducting l/3rd amount towards development charges gained force in several decisions during the period 2004-2005. But, in Viluben, the Supreme Court indicated that the deduction towards development charges may range between 20% and 50%.

In Lal Chand Vs. Union of India (UOI) and Another, , the percentage of deduction was held to vary from 20% to 75%. This was on account of the fact that there are two components for deduction for development, namely, (i) with reference to the area required to be utilised for developmental works; and (ii) the cost of the development works.

After taking a survey of all decisions, where the Supreme Court reiterated the necessity to deduct development charges at various rates, ranging from 20% to 50% (or 75%), the Court held in Valliyammal and Another Vs. Special Tahsildar (Land Acquisition) and Another etc. etc., that there must be a deduction of 1/3rd of the amount towards development costs. Therefore, based upon the decision in Valliammal, it is contended by Mr. K. Govindarajan, learned counsel for BSNL, that the Tribunal committed a mistake in not deducting development charges.

In answer to the above contention, Mr. S.S. Sundar, learned counsel for the 1st respondent (land owner), contended that the concept of deducting development charges would not apply to a case where the entire land acquired was for a single purpose, namely, to establish an Electronic Telephone Exchange. There was nothing needed for the statutory authorities or the local bodies to develop in such cases. In support of this contention, the learned counsel for the 1st respondent relies upon the decision of the Supreme Court in Chakas Vs. State of Punjab and Others, . In the said decision, the Reference Court deducted 50% towards development charges. But, the Supreme Court reduced the deduction from 50% to 10%. While doing so, the Supreme Court held in paragraphs 23 and 24 that when a bulk of a land is acquired for the purpose of one single beneficiary to set up its own industry and other infrastructure, the deduction towards development charges would not exceed 10%.

Similarly, in Indraj Singh (Dead) through L.Rs. and Others Vs. State of Haryana and Another, , the Supreme Court held that the deduction to the extent of l/3rd of the value was harsh as the land had been developed by HUDA and that 10% deduction was sufficient.

In Ashrafi and Others Vs. State of Haryana and Others, , the Supreme Court held a deduction of 40% to be unjustified, but allowed a deduction of 33-1/3%.

From the rival contentions and the decisions relied upon by the learned counsel on both sides, it is clear that the law is fairly well settled to the effect that there must be a deduction towards development charges at the rate of 20% to 50%. But, in exceptional cases where the entire land is acquired for a single beneficiary, the Court also permitted in Chakas, the deduction of just 10%. Therefore, on the last contention raised by the appellants, the question that falls for consideration is as to how much is to be deducted towards development charges.

There is no dispute about the fact that the land acquisition in question was in respect of only Acre 1.00 and that the entire land was acquired for the benefit of BSNL. It is not an acquisition for any housing projects or for the development of industrial lay-out.

In paragraph 12 of the Award, the Land Acquisition Tribunal has come to a conclusion on the basis of the evidence on record, namely, Exs.R-1 to R-10, that one portion of the acquired land had been used for expansion of road under a project for extension of Perumalpuram, by the Local Planning Authority. Therefore, we are of the view that the Land Acquisition Tribunal could have deducted 10% towards development charges.

In other words, we are of the view that the only area in which the appellants are entitled to succeed is the one relating to deduction towards development charges. But we have already recorded a finding that the entire land acquired was for the sole purpose of establishing a Telephone Exchange. Therefore, the question of development did not actually arise. Adding insult to injury, a portion of the land has been taken away by the Local Planning Authority for the purpose of laying road, not for the benefit of the Telephone Exchange, for the benefit of an approved lay-out in Perumalpuram. A period of exactly 20 years have passed from the date of the Notification under Section 4(1) of the Act. The Award itself was passed in the year 1996 and reference was made in 2000. The Reference court gave an Award on 06.06.2005 and the Award got stuck in this Court for the past nine years. Therefore, we are of the view that to reduce the amount from Rs. 28000/- per cent, on the ground that some amount is to be deducted towards development charges, would result in grave injustice.

There is yet another reason for us to come to the above conclusion. If the Reference Court had adopted escalation at the rate of 10% or 12% on cumulative basis, it would have arrived at the same amount of compensation, even after deducting 10% towards development charges. Therefore, we are of the view that any reduction in the quantum of compensation fixed by the Land Acquisition Tribunal would be inequitable and unjustified. Therefore, both the appeals are dismissed. No costs.